Trade winds in RBI sails: A receding El Niño may ease food inflation
- strapline: The likelihood of El Niño easing by monsoon time has risen. With luck, rainfall will relieve inflationary pressures and help our central bank achieve the price stability it’s aiming for.
Meteorologists have predicted that El Niño conditions are set to dissipate by this summer, perhaps even by June, raising hopes of a bountiful Indian monsoon in 2024. After below-average cumulative rainfall and a warm 2023, various national weather forecasting agencies now expect this see-saw of the Pacific Ocean to turn neutral by April-June and then start developing into La Niña, the opposite condition. As geography dictates and experience shows, this switch implies a shift from a relatively parched Indian subcontinent to a wetter one. So, if the latest forecasts turn out to be accurate, it would raise the probability of rainfall that will favour healthy farm harvests, keep food prices in check and aid India’s central bank in keeping control of the rupee’s internal value by ensuring that it does not lose its purchasing power at an annual rate that departs from a preset 4%. In other words, we have good economic news from the other side of the globe.